MVPs of MVA

Email this article

To*

Please enter your email address*

Subject*

Comments*

Like the wicked queen in the tale of Snow White, analysts are forever trying to identify the fairest of them all — the strongest, most innovative, and fastest-growing companies. Finance executives, in turn, are constantly seeking a metric that communicates a company’s financial condition in a way that enables employees to make rational decisions about operations. There is no shortage of metrics, but as the past two years have witnessed, many of them, in particular EBITDA and pro forma, have been vulnerable to distortion.

Enter MVA, or market value added, which measures the amount of wealth a company has created since its inception. MVA is an extension of EVA (economic value added), a metric that became popular in the 1990s, when companies used it to measure profitability not just at the corporate level, but also at the level of business units and individual projects.

EVA is described by Bennett Stewart, senior partner at consulting firm Stern Stewart & Co., which has trademarked the acronym, as an estimate of the amount by which earnings exceed or fall short of the rate of return shareholders and lenders could get by investing in other securities of comparable risk. “EVA is a practical method of estimating the economic profit that is earned, as opposed to the accounting profit,” he says. “It’s really a finance tool for nonfinance executives. Finance execs don’t need EVA.”

Recommended Stories:

“It simplifies everything,” insists Sal Fazzolari, senior vice president, CFO, and treasurer of Harsco Corp., a Camp Hill, Pennsylvania-based industrial-services firm, which began implementing MVA and EVA as financial-measurement tools in 2001. “It’s one measurement for everyone in the company to concentrate on. It takes into consideration all of a company’s financials.”

At the heart of MVA and EVA are the beliefs that (1) the primary objective of management should be to maximize return to shareholders and (2) a company should earn more than its cost of investment.

In a nutshell, EVA is equal to a company’s net operating profits after taxes (NOPAT) minus a capital charge — the amount of capital invested in the business times the cost of capital. EVA converts the balance sheet and income statement into one measurement of profit, Stewart explains.

“It’s as if the company ended up with no assets and leased everything, factored all receivables,” and so on, he says, adding, “it’s the profit that would be reported if all assets were externally financed.” Stewart argues that looking at financials in this way enables a company to truly understand whether it is profitable because it manages assets well or simply because it is an owner of assets.

Fazzolari says that for many years, different business units at Harsco focused on a variety of metrics, such as return on capital, return on sales, net income, and sales. “These metrics can send you in different directions,” he says. “EVA makes you focus on all of the financial statements.”

EVA has enabled Harsco to improve its capital-allocation process by standardizing the way each manager and employee analyzes a project. For example, if a customer requests an extra 30 days to pay its bill, Harsco’s employees can immediately calculate the potential financial impact on the company. Each month, Harsco calculates EVA by business unit. “It is automatically generated,” says Fazzolari. Each employee can then access the tools needed to calculate EVA.

At consulting firm Accenture, EVA performance is linked with compensation for the firm’s partners. “A big portion of our partners’ and units’ compensation is based on EVA generation,” explains CFO Harry You. You likens EVA to a more precise version of return on invested capital. He also uses EVA in doing business with clients. “We look at the way we can create EVA for them,” he says. “We’re selling our business based on how we sell EVA to our clients. A vast majority of our clients may not use it, but they understand it.”

Defining MVA

“EVA is the most important empirical link to MVA,” says Stewart. The change in EVA explains 35 percent of the change in MVA, or seven times more than sales growth, while the change in earnings per share explains only about 3 percent of the change in MVA.

MVA itself is the stock market’s assessment of the net present value (NPV) of EVA. In other words, MVA is the difference between the market value of a company (which includes both equity and debt) and the capital that lenders and shareholders have entrusted to the company over the years. Thus, MVA is a measure of the difference between “cash in” (what investors have contributed) and “cash out” (what they could get by selling at today’s prices), Stewart explains.

If MVA is positive, it means that the company has increased the value of the capital entrusted to it and thus created shareholder wealth. If MVA is negative, the company has destroyed wealth.

Like all other metrics, says Accenture’s You, MVA has its limitations. For one thing, like a company’s price-to-earnings ratio, it is in part captive to the vagaries of the stock market. “Over longer periods, MVA correlates with EVA, but over a shorter time, it may not,” he insists.

On the other hand, MVA is a better measure of a company’s shareholder-wealth creation than simple market capitalization. Take, for example, Verizon Communications. The telecom giant’s market value is $200 billion, nearly the size of Microsoft’s. Although one would think the two companies therefore rewarded their shareholders equally, Microsoft’s MVA is 13 times greater than Verizon’s. This is because Verizon issued $65 billion of stock to buy GTE in 2000, skewing its market value growth.

And this transaction followed by just three years the all-stock merger of Bell Atlantic and Nynex that first created Verizon. In the past 10 years, Verizon’s total return to shareholders has been only 7.84 percent, according to Stewart.

All High Performers Are Not Alike

The top three performers, according to the MVA ranking of Tier-1 companies, are General Electric, Microsoft, and Wal-Mart Stores. (Note: The rankings delineate Tier 1, Tier 2, and Tier 3 companies by size.) Although representing diverse industry sectors and business strategies, all three companies have created nearly the same amount of wealth for their shareholders — GE, $223 billion; Microsoft, $212 billion; and Wal-Mart, $207 billion.

Wal-Mart had $246 billion in sales in the most recent year, while Microsoft had “only” $31 billion. GE has $156 billion in long-term debt, while Microsoft has none. Microsoft’s return on average capital is nearly twice that of the other two companies.

Of the top three companies, GE has the highest MVA and highest EVA. Wal-Mart’s EVA is higher than Microsoft’s, which means that the market is projecting different rates of growth for these companies. The fact that Microsoft has about the same MVA but a much lower EVA than GE means the market believes Microsoft has a greater opportunity to grow. This is partly underscored by its 22 percent return on average capital, which is nearly double that of its two MVA peers.

What does it mean that GE has the highest MVA and EVA? “If the MVA for GE is the same as for the other two companies, that means GE has less prospect for growth compared with the other two,” Stewart explains. In fact, although its EVA has grown somewhat over the past three years, its MVA has eroded by more than 17 times that of Wal-Mart over the three-year period. “[Its MVA score suggests] that GE doesn’t have the same intrinsic growth opportunity.

Wal-Mart has stupendous growth prospects but the lowest return on capital, so it has significant growth at lower margins. Microsoft, on the other hand, is a higher-growth, higher-return company. GE has a low-return, low-growth base, and a modest chance to grow its EVA,” he adds.

Perhaps the most impressive large companies in the Tier-1 ranking are Procter & Gamble and Johnson & Johnson, which show the best three-year improvements in MVA. (Changes in rankings between 1999 and 2002 are shown on the charts beginning on page 62, while three-year averages for EVA and MVA are available at www.cfo.com.) Procter & Gamble leaped from number 32 in 1999 to number 6 in 2002 in terms of MVA. Biopharmaceuticals company Gilead Sciences showed the highest three-year MVA gain among the 25 largest market-cap companies with less than $700 million in revenues, rising to second place from number 174 three years ago.

Technology companies rank high in terms of MVA despite the short life span of many new technology and Internet companies. Six of the 14 top large companies are tech companies; Ebay and Qualcomm fall among the top four midsize (Tier 2) companies, and Linear Technology is the highest company with sales below $700 million (Tier 3). From 1999 to 2002, Ebay, in fact, moved from number 25 to number 2 among companies with sales between $700 million and $7 billion, and now boasts twice the MVA of Amazon.com.

It’s not quite the magic number that will enable a company to understand precisely what it needs to do to maximize shareholder value and increase profitability. But MVA at least offers one of the least deceptive of mirrors for companies seeking to know whether they are the fairest of their peers.

What The Acronyms Mean

MVA

Market Value Added

The difference between total market value (value of equity and debt) and invested capital (money/cash investors contributed to the business). It measures the difference between what investors “put” into the company and what it is currently worth. MVA is also equal to the present value of all future EVAs.

EVA

Economic Value Added

Real measure of economic profit. This is calculated by reducing the full cost of capital from NOPAT — net operating profit after taxes. The full cost of capital captures the opportunity cost of all invested capital at the blended cost of equity and debt as applied by the specific business.

P Score

A measure of performance based on one-year sales growth; EVA/sales; EVA/capital; and one-year change in EVA over capital.

R Score

A measure of riskiness. It looks at stock-return volatility, leverage, cash flow, and size.

2003 MVA Rankings

Tier 1: 45 largest market-cap companies with sales of more than $7 billion

2002

1999

Company name

MVA

MV

Capital

EVA

Sale

Growth1

Performance2

Risk3

1

2

General Electric Co

222,767

322,190

99,423

5,983

73,420

32%

79%

4%

2

4

Microsoft Corp

212,340

237,547

25,207

2,201

30,785

41%

78%

7%

3

6

Wal-Mart Stores

207,346

280,970

73,624

2,928

244,524

48%

79%

8%

4

22

Johnson & Johnson

124,237

171,829

47,592

2,839

36,298

32%

90%

4%

5

12

Merck & Co

107,076

144,624

37,548

3,872

51,790

58%

87%

2%

6

32

Procter & Gamble Co

92,231

133,248

41,017

2,315

42,606

7%

79%

3%

7

8

Intl Business Machines Corp

90,422

193,955

103,533

(8,032)

81,186

-7%

9%

23%

8

13

Exxon Mobil Corp

85,108

273,634

188,526

(2,175)

178,909

11%

30%

1%

9

21

Coca-Cola Co

82,413

107,007

24,594

2,496

19,983

2%

85%

2%

10

3

Intel Corp

77,395

114,574

37,179

(3,736)

26,764

-9%

5%

18%

11

14

Dell Computer Corp

69,425

76,637

7,212

360

33,730

43%

59%

17%

12

16

Citigroup Inc

68,078

176,795

108,716

2,964

92,029

12%

65%

7%

13

1

Cisco Systems Inc

59,702

109,249

49,547

(4,623)

19,209

28%

15%

36%

14

5

Oracle Corp

59,502

60,453

951

1,401

9,417

-3%

77%

27%

15

24

Lilly (Eli) & Co

57,366

74,761

17,395

1,096

11,078

12%

68%

7%

16

29

United Parcel Service Inc

57,036

77,347

20,312

875

31,272

16%

65%

2%

17

38

Fannie Mae

54,181

64,496

10,315

2,457

52,901

43%

92%

0%

18

11

Pfizer Inc

52,683

194,393

141,711

(2,779)

32,373

100%

35%

24%

19

40

Pepsico Inc

49,718

81,184

31,466

1,258

25,541

31%

87%

14%

20

36

Abbott Laboratories

49,181

71,352

22,171

1,562

17,685

34%

88%

11%

21

18

Home Depot Inc

43,955

69,635

25,680

1,346

58,247

52%

85%

11%

22

57

3M Co

41,012

55,768

14,756

817

16,332

4%

75%

2%

23

19

American International Group

40,845

129,056

88,211

(1,249)

67,482

66%

47%

5%

24

37

Medtronic Inc

40,778

60,416

19,639

(26)

7,309

55%

53%

11%

25

33

Pharmacia Corp

40,679

62,897

22,218

(1,078)

13,993

53%

36%

5%

26

31

Wyeth

38,443

66,206

27,763

696

14,584

8%

72%

10%

27

52

Comcast Corp

38,008

112,530

74,522

(3,555)

12,460

101%

19%

62%

28

56

Anheuser-Busch Cos Inc

37,916

50,536

12,620

1,314

13,566

16%

91%

2%

29

46

Du Pont (E I) De Nemours

35,445

59,862

24,417

(96)

24,134

-11%

29%

2%

30

23

Bristol Myers Squibb

33,872

58,015

24,142

777

18,119

7%

58%

3%

31

64

Federal Home Loan Mortg Corp

28,984

36,500

7,516

4,134

36,173

100%

NA

NA

32

70

Altria Group Inc

28,230

102,082

73,852

6,696

62,182

1%

82%

9%

33

30

American Express

27,539

43,671

16,132

707

24,649

10%

61%

2%

34

54

Colgate-Palmolive Co

26,687

35,686

8,999

734

9,294

2%

83%

7%

35

86

Lowes Cos

25,152

39,665

14,513

226

26,491

67%

75%

33%

36

112

Unitedhealth Group Inc

25,004

31,302

6,298

856

25,020

28%

91%

6%

37

62

Walgreen Co

24,417

40,488

16,071

572

30,564

56%

83%

26%

38

60

Wells Fargo & Co

24,065

75,537

51,473

744

28,473

31%

67%

1%

39

25

Bellsouth Corp

21,787

70,580

48,793

(1,286)

22,711

-10%

17%

11%

40

.

Kraft Foods Inc

21,770

73,524

51,754

732

29,723

11%

63%

NA

41

92

Bank Of America Corp

20,427

100,418

79,992

341

46,362

-10%

38%

0%

42

63

Target Corp

19,698

42,846

23,148

432

43,917

30%

68%

43%

43

91

First Data Corp

19,323

29,346

10,023

503

7,636

38%

88%

13%

44

61

Gillette Co

17,738

36,771

19,033

(432)

8,453

-15%

24%

6%

46

26

Verizon Communications

16,138

200,132

183,994

(5,612)

67,625

104%

35%

48%

48

34

Schering-Plough

15,930

27,211

11,281

80

10,180

11%

63%

5%

50

72

United Technologies Corp

15,740

42,816

27,076

721

28,541

14%

62%

16%

51

39

Morgan Stanley

15,234

41,790

26,556

86

32,242

-5%

40%

6%

52

188

Lockheed Martin Corp

13,943

35,593

21,650

(549)

26,578

4%

40%

22%

53

53

Automatic Data Processing

13,740

32,339

18,599

(332)

10,084

48%

32%

23%

54

78

Emerson Electric Co

13,734

26,543

12,809

(88)

13,770

-4%

31%

4%

55

17

Texas Instruments Inc

13,346

32,593

19,247

(3,151)

8,383

-11%

4%

47%

57

93

General Mills Inc

12,073

27,358

15,285

72

10,284

56%

71%

49%

58

115

Southern Co

11,817

34,358

22,541

502

10,549

-9%

64%

11%

59

66

Goldman Sachs Group Inc

11,369

32,130

20,761

(322)

22,854

-10%

32%

16%

60

45

Nextel Communications

11,233

28,559

17,326

(1,521)

8,721

162%

47%

80%

62

55

Viacom Inc -Cl B

10,682

99,362

88,680

(5,092)

24,606

91%

21%

45%

65

82

Dow Chemical

10,098

52,968

42,870

(2,145)

27,609

46%

23%

46%

69

28

Disney (Walt) Co

9,282

56,974

47,692

(2,072)

25,779

8%

21%

25%

74

140

Fedex Corp

8,558

31,041

22,483

(596)

22,073

24%

37%

29%

75

44

McDonalds Corp

8,339

38,179

29,840

(39)

15,406

16%

47%

23%

76

85

Clear Channel Communications

8,299

34,966

26,668

(2,040)

8,421

214%

33%

58%

78

122

Dominion Resources Inc

7,897

35,117

27,220

533

10,218

85%

80%

44%

79

98

Fox Entertainment Group Inc

7,721

29,439

21,719

(941)

10,413

31%

35%

29%

80

73

Merrill Lynch & Co

7,697

32,691

24,994

(208)

28,152

-19%

29%

19%

81

144

Exelon Corp

7,532

36,346

28,814

719

14,955

175%

87%

56%

82

76

Kimberly-Clark Corp

7,518

31,210

23,692

(12)

13,566

4%

40%

8%

87

162

Cardinal Health Inc

6,960

27,513

20,553

(386)

53,447

71%

49%

10%

93

77

Alcoa Inc

5,822

33,713

27,891

(1,130)

20,263

24%

21%

49%

95

20

Hewlett-Packard Co

5,476

63,243

57,767

(3,726)

63,082

44%

24%

61%

106

106

Conocophillips

3,963

63,943

59,980

(849)

50,512

272%

61%

45%

108

102

Cigna Corp

3,826

85,436

81,611

(3,967)

19,343

3%

23%

5%

113

48

Ford Motor Co

3,459

69,218

65,758

(4,826)

134,425

0%

12%

67%

117

47

Chevrontexaco Corp

3,135

93,457

90,322

(3,139)

91,685

191%

60%

26%

122

193

Union Pacific Corp

2,637

28,634

25,997

(89)

12,491

11%

45%

21%

124

249

Washington Mutual Inc

2,599

33,135

30,536

1,215

18,755

38%

87%

6%

127

184

Firstenergy Corp

2,515

30,661

28,146

(77)

12,152

92%

63%

48%

133

80

Aes Corp. (The)

2,091

29,803

27,713

(2,207)

8,632

165%

28%

86%

138

240

UAL Corp

1,842

35,659

33,816

(4,219)

14,286

-21%

NA

NA

140

104

Cendant Corp

1,801

36,497

34,696

(537)

14,088

162%

50%

88%

145

153

U S Bancorp

1,407

36,384

34,977

(28)

15,422

140%

72%

19%

146

169

Pg&E Corp

1,405

27,498

26,093

(1,235)

12,495

-40%

17%

55%

184

232

Intl Paper Co

(313)

37,973

38,287

(1,317)

24,976

2%

21%

44%

196

216

Northrop Grumman Corp

(748)

34,216

34,965

(721)

17,206

91%

41%

66%

200

186

Delta Air Lines Inc

(1,049)

27,445

28,495

(2,161)

13,305

-10%

6%

69%

217

123

Xerox Corp

(2,240)

28,170

30,411

(1,123)

15,849

-18%

18%

58%

223

244

AMR Corp/De

(2,763)

31,049

33,812

(3,459)

17,326

-2%

5%

82%

228

114

El Paso Corp

(3,864)

28,817

32,681

(2,273)

12,194

15%

30%

77%

229

118

Boeing Co

(3,871)

48,642

52,513

(542)

54,069

-7%

31%

34%

237

247

Bank One Corp

(6,577)

40,164

46,741

(1,597)

22,171

-13%

16%

5%

238

233

Sears Roebuck & Co

(6,859)

44,898

51,758

(314)

41,366

1%

39%

59%

240

241

AT&T Wireless Services Inc

(7,106)

36,249

43,355

(5,102)

15,631

105%

18%

83%

244

67

Honeywell International Inc

(9,231)

32,846

42,078

(833)

22,274

-6%

18%

42%

245

251

Wachovia Corp

(10,182)

45,839

56,021

(1,762)

23,591

7%

22%

10%

246

101

General Motors Corp

(14,081)

105,697

119,778

(5,065)

155,974

2%

27%

40%

247

27

Motorola Inc

(15,904)

30,030

45,934

(5,849)

26,679

-17%

4%

56%

248

50

J P Morgan Chase & Co

(25,499)

47,466

72,965

(3,646)

43,372

29%

17%

22%

249

9

AOL Time Warner Inc

(27,148)

103,550

130,697

(27,539)

40,961

757%

17%

81%

251

42

SBC Communications Inc

(38,372)

118,558

156,930

(8,434)

43,138

-13%

9%

14%

252

65

AT&T Corp

(72,674)

75,733

148,406

(27,116)

49,931

-20%

4%

23%

Notes: All values — except for the performance and risk measures — are in millions. MVA rankings are based on all Tier-1 companies. Since some Tier-1 companies have low MVA rankings, numbers are not sequential. 1Three-year cumulative aggregate sales growth. 2Indicates the company’s ranking for operating performance relative to Russell 1,000 companies. The measure runs from 0 to 100. The higher the number, the stronger the company’s operating performance. 3Indicates the company’s ranking for risk relative to Russell 1,000 companies. The measure runs from 0 to 100. The lower the number, the less risky the company.

2003 MVA Rankings

Tier 2: 25 largest market-cap companies with sales between $700 million and $7 billion

2002

1999

Company name

MVA

MV

Capital

EVA

Sale

Growth1

Performance2

Risk3

1

6

Amgen Inc

57,361

80,204

22,844

(103)

5,523

65%

76%

57%

2

25

Ebay Inc

25,489

29,094

3,606

(156)

1,214

440%

32%

90%

3

85

Forest Laboratories -Cl A

17,200

19,006

1,806

307

2,022

156%

99%

NA

4

2

Qualcomm Inc

17,167

24,194

7,027

(721)

3,785

-3%

11%

54%

5

92

Slm Corp

15,425

16,820

1,395

589

3,436

5%

99%

8%

6

35

Cox Communications -Cl A

15,324

27,993

12,669

(489)

5,039

117%

51%

16%

7

14

Echostar Commun Corp -Cl A

15,076

19,107

4,031

(583)

4,821

201%

28%

91%

8

36

Fifth Third Bancorp

14,945

28,846

13,901

328

6,317

75%

85%

15%

9

45

Gannett Co

13,989

25,702

11,713

153

6,422

22%

58%

18%

10

61

Avon Products

12,867

16,165

3,298

363

6,228

18%

87%

30%

11

5

Applied Materials Inc

12,546

21,322

8,776

(1,328)

5,116

-15%

4%

52%

12

24

Amazon.Com Inc

11,891

14,079

2,188

(164)

4,169

117%

50%

89%

13

89

Stryker Corp

11,729

14,432

2,703

147

3,012

43%

89%

22%

14

15

Liberty Media Corp -Ser A

11,658

36,530

24,872

NA

2,084

106%

NA

NA

15

107

Boston Scientific Corp

11,599

19,638

8,039

(143)

2,919

3%

32%

46%

16

50

Harley-Davidson Inc

11,291

13,897

2,607

352

4,302

66%

97%

13%

17

20

Genentech Inc

11,095

19,037

7,942

(621)

2,618

97%

45%

46%

18

82

Wrigley (Wm) Jr Co

10,894

12,848

1,955

283

2,746

33%

95%

NA

19

115

Bed Bath & Beyond Inc

10,746

13,496

2,749

93

3,495

103%

88%

NA

22

88

Tribune Co

9,633

20,676

11,043

(388)

5,384

67%

26%

47%

23

1

Emc Corp/Ma

9,358

19,646

10,289

(1,652)

5,438

-19%

3%

47%

26

70

Southwest Airlines

8,650

16,546

7,896

(413)

5,580

14%

17%

40%

28

73

Mcgraw-Hill Companies

8,359

13,362

5,003

88

4,788

20%

63%

9%

30

41

Cablevision Sys Corp -Cl A

7,929

17,344

9,414

(706)

4,003

2%

32%

77%

31

22

Bank Of New York Co Inc

7,857

14,888

7,031

421

5,756

-5%

54%

3%

32

37

Guidant Corp

7,847

12,504

4,656

306

3,240

38%

93%

31%

36

142

Praxair Inc

6,836

13,611

6,775

123

5,128

11%

62%

23%

38

71

Pitney Bowes Inc

6,808

13,141

6,333

213

4,410

-1%

70%

19%

39

64

Campbell Soup Co

6,796

12,984

6,189

279

6,217

-6%

59%

19%

45

99

Danaher Corp

6,341

12,676

6,336

17

4,577

43%

60%

49%

54

83

Usa Interactive

5,537

15,364

9,827

1,247

4,621

43%

81%

20%

66

151

Air Products & Chemicals Inc

4,821

12,911

8,090

5

5,532

10%

45%

30%

71

302

Newmont Mining Corp

4,531

14,597

10,066

(185)

2,658

90%

49%

82%

74

165

Apache Corp

4,387

12,575

8,187

86

2,560

97%

86%

65%

78

130

Anadarko Petroleum Corp

4,156

17,686

13,529

20

3,860

451%

77%

78%

81

3

Yahoo Inc

3,906

14,463

10,557

(1,931)

953

62%

20%

74%

88

242

Ppl Corp

3,755

15,180

11,424

306

5,429

18%

74%

58%

110

163

BB&T Corp

2,966

14,775

11,808

157

6,127

58%

72%

10%

118

386

Sempra Energy

2,713

13,146

10,433

244

6,020

12%

63%

37%

133

131

Unocal Corp

2,470

12,689

10,219

(343)

5,224

-11%

18%

28%

185

516

Dte Energy Co

1,826

18,323

16,497

199

6,749

43%

69%

47%

225

223

Devon Energy Corp

1,425

15,227

13,802

(304)

4,316

488%

51%

84%

263

597

Norfolk Southern Corp

1,154

17,746

16,592

(343)

6,270

19%

37%

45%

431

418

Nisource Inc

509

13,687

13,178

79

6,094

94%

62%

66%

451

616

Burlington Resources Inc

448

13,915

13,468

(329)

2,964

44%

34%

50%

489

18

Computer Associates Intl Inc

359

13,477

13,118

(1,924)

3,087

-47%

3%

66%

923

945

Allied Waste Inds Inc

(1,546)

13,176

14,722

(295)

5,517

65%

41%

66%

935

53

Williams Cos Inc

(2,137)

21,149

23,286

(876)

5,608

-35%

10%

71%

941

75

Dynegy Inc

(2,695)

13,779

16,474

(1,267)

5,553

-64%

NA

NA

949

865

Charter Communications Inc

(5,715)

21,169

26,884

(2,429)

4,566

220%

27%

91%

Notes: All values — except for the performance and risk measures — are in millions. MVA rankings are based on all Tier-1 companies. Since some Tier-1 companies have low MVA rankings, numbers are not sequential. 1Three-year cumulative aggregate sales growth. 2Indicates the company’s ranking for operating performance relative to Russell 1,000 companies. The measure runs from 0 to 100. The higher the number, the stronger the company’s operating performance. 3Indicates the company’s ranking for risk relative to Russell 1,000 companies. The measure runs from 0 to 100. The lower the number, the less risky the company.

2003 MVA Rankings

Tier 3: 25 largest market-cap companies with sales below $700 million

2002

1999

Company name

MVA

MV

Capital

EVA

Sale

Growth1

Performance2

Risk3

1

7

Linear Technology Corp

9,025

9,584

559

27

558

-4%

52%

45%

2

174

Gilead Sciences Inc

7,956

9,754

1,798

(135)

467

176%

43%

92%

3

70

Idec Pharmaceuticals Corp

4,077

5,829

1,753

(57)

404

243%

28%

96%

4

47

Microchip Technology Inc

3,133

4,331

1,198

(89)

649

42%

20%

NA

6

71

Westwood One Inc

2,879

4,129

1,250

(14)

551

54%

49%

57%

7

157

Pixar

2,709

3,285

577

31

202

67%

98%

NA

8

111

Sei Investments Co

2,447

2,766

318

109

621

36%

96%

35%

9

14

Citrix Systems Inc

2,391

3,558

1,167

(197)

527

31%

6%

94%

10

25

Mercury Interactive Corp

2,358

3,016

658

(125)

400

113%

13%

97%

11

23

Qlogic Corp

2,240

3,587

1,347

(163)

411

120%

15%

NA

12

1

Juniper Networks Inc

2,126

4,539

2,413

(427)

547

433%

16%

98%

13

384

Memc Electronic Matrials Inc

2,107

2,755

648

(21)

687

-1%

NA

NA

14

1232

Scios Inc

2,069

2,422

353

(112)

111

83%

NA

NA

15

286

Patterson-Uti Energy Inc

1,883

2,652

769

(81)

528

248%

57%

NA

16

608

Chicos Fas Inc

1,847

2,123

276

38

494

253%

99%

93%

17

67

Ensco International Inc

1,843

4,363

2,521

(117)

698

92%

32%

87%

18

28

Sepracor Inc

1,807

2,577

770

(349)

239

955%

NA

NA

20

108

Rcn Corp

1,737

4,369

2,632

(1,090)

457

66%

NA

NA

21

102

Gentex Corp

1,723

2,268

545

37

395

51%

92%

NA

22

477

Brown & Brown Inc

1,672

2,132

460

63

456

158%

100%

59%

23

.

Jetblue Airways Corp

1,589

3,132

1,543

(15)

635

NA

49%

NA

24

474

Fair Isaac Corp

1,562

2,579

1,018

(55)

454

63%

25%

89%

25

185

Entercom Communications Corp

1,547

3,052

1,505

(59)

391

82%

47%

88%

27

49

Hispanic Broadcasting -Cl A

1,520

2,843

1,323

(94)

257

30%

20%

74%

31

141

Cephalon Inc

1,407

3,126

1,719

23

507

1028%

55%

100%

32

173

Intl Speedway Corp -Cl A

1,400

2,380

979

20

556

70%

74%

40%

34

498

Education Management Corp

1,364

2,117

753

30

582

105%

93%

94%

36

287

Sicor Inc

1,351

2,200

849

49

456

99%

97%

90%

37

43

Nextel Partners Inc

1,328

3,005

1,677

(349)

671

1950%

NA

NA

42

216

Valley National Bancorp

1,233

2,222

989

45

595

25%

80%

22%

46

1491

Capitol Federal Financial

1,201

2,193

992

(1)

587

43%

56%

6%

56

137

Cox Radio Inc -Cl A

1,101

2,929

1,828

(89)

421

40%

49%

85%

65

363

Philadelphia Suburban Corp

1,039

2,497

1,458

12

322

25%

68%

79%

66

427

Paxson Comm Corp -Cl A

1,032

2,256

1,224

(339)

270

28%

NA

NA

74

62

Ameritrade Holding Corp

955

2,135

1,181

(64)

443

41%

NA

NA

82

493

Leucadia National Corp

922

2,131

1,208

(111)

242

-66%

3%

43%

84

117

Rowan Cos Inc

919

2,738

1,820

(161)

617

34%

12%

94%

93

369

Getty Images Inc

830

2,153

1,323

(107)

463

87%

35%

93%

99

167

Newfield Exploration Co

789

2,700

1,911

(21)

662

135%

77%

95%

105

392

Lee Enterprises

764

2,185

1,421

20

589

45%

81%

75%

113

84

Checkfree Corp

689

2,634

1,945

(350)

518

88%

13%

96%

359

.

Westport Resources Corp

258

2,218

1,960

(131)

428

480%

NA

NA

502

158

Radio One Inc

167

2,237

2,069

(13)

286

310%

57%

100%

641

88

Intersil Corp -Cl A

112

2,539

2,427

(262)

650

22%

7%

90%

795

1437

Extended Stay America Inc

70

2,337

2,267

(65)

548

31%

27%

90%

929

186

Emmis Communictns Cp -Cl A

37

2,326

2,289

(142)

554

82%

23%

97%

1370

177

Invitrogen Corp

(134)

2,204

2,338

(203)

649

849%

18%

99%

1493

1509

Stewart Enterprises -Cl A

(866)

2,462

3,328

(127)

559

-27%

NA

NA

1495

30

Millennium Pharmactcls Inc

(920)

3,684

4,604

(653)

353

92%

12%

98%

1506

8

Ciena Corp

(2,036)

2,268

4,304

(1,537)

269

-50%

0%

99%

Notes: All values — except for the performance and risk measures — are in millions. MVA rankings are based on all Tier-1 companies. Since some Tier-1 companies have low MVA rankings, numbers are not sequential. 1Three-year cumulative aggregate sales growth. 2Indicates the company’s ranking for operating performance relative to Russell 1,000 companies. The measure runs from 0 to 100. The higher the number, the stronger the company’s operating performance. 3Indicates the company’s ranking for risk relative to Russell 1,000 companies. The measure runs from 0 to 100. The lower the number, the less risky the company.